Taiwan’s economy shrank at a slower-than-expected rate in the third quarter on better recovery in domestic consumption and improving demand for electronics made by local firms, prompting an upward revision yesterday in the government’s economic forecast for this year and next year.
The nation’s gross GDP fell 1.29 percent year-on-year in the third quarter, better than the 3.52 percent contraction forecast by the Directorate-General Of Budget, Accounting and Statistics (DGBAS) in August, the statistic agency said.
That also beat most economists’ expectations, including Citigroup Taiwan chief economist Cheng Cheng-mount (鄭貞茂), an optimist compared with his peers. Cheng thought Taiwan’s third-quarter GDP would decrease by 1.9 percent.
Taiwan’s economy may start growing again in the current quarter, ending five straight quarterly decline, the DGBAS projected.
That would bring the nation’s full year GDP to a decline of 2.53 percent, rather than the decline of 4.04 percent estimated previously, the statistics department said.
“We predict the economic growth next year will be moderate,” said DGBAS head Shih Su-mei (石素梅), as recovery in electronic consumption in Taiwan’s major export destinations such as the US would be slow because of the tough job market. “The nation’s GDP will not recover to the pre-economic-crisis level for the whole year of 2010 on a quarterly basis.”
Next year, the economy may grow by 4.39 percent annually, faster than a 3.92 percent projection the DGBAS made three months ago, she said.
Exports, one of the major pillars of Taiwan’s economy, are expected to expand by 15.4 percent year-on-year to US$234.9 billion next year, which still would be below the pre-economic-recession level of US$246.7 billion in 2007, Shih said.
Asia would outpace other areas in recovering demand for products made by Taiwanese manufacturers, Cheng said.
Private investment would be another driving force as improving exports would encourage local semiconductor and flat-panel makers to resume spending on upgrade equipment, which was suspended during the economic recession, Cheng said.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the nation’s biggest contract chipmaker, has said that spending on new equipment next year would be higher than this year’s revised US$2.7 billion.
Separately, DGBAS said the nation’s consumer price index could drop at a deeper-than-expected 0.73 percent for the full year of the year because of falling vegetable and fruit prices.
Next year, the CPI could return to positive territory with a rise of 0.92 percent because of rising commodity and housing prices, the statistics agency said.
The agency said it did not see any deflation risk this year because consumer prices only fell for one year rather than two consecutive year.
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